Title: COMPANY POLITICAL CONNECTIONS AND AUDITOR SELECTION DECISIONS WITH EARNINGS MANAGEMENT AS A MODERATING VARIABLE

Authors: PUTRI ARMADIYANTI

Affiliations: Master of Accounting Study Program, Faculty of Economics and Business, Universitas Airlangga Surabaya

Publisher: Universitas Airlangga

Abstract

Indonesia offers an interesting context for exploring research on political connections, as it is an emerging market with a history of strong political connections in business. This study aims to empirically examine the influence of political connections held by corporate insiders on auditor selection decisions and whether the influence between political connections and auditor selection is moderated by earnings management behavior. This study used a sample of all companies from all sectors listed on the Indonesia Stock Exchange (IDX) in 2015, excluding 405 companies in the financial and insurance industry. The analytical techniques used were logistic regression analysis and moderated regression analysis. The results revealed that companies with politically connected boards of commissioners and directors have a significant positive influence on auditor selection decisions, meaning that companies with political connections tend to choose industry specialist auditors as their external auditors. The results also revealed that earnings management does not moderate the influence of corporate political connections on auditor selection decisions. This study provides new insights into the use of political connections in the business environment, particularly in auditor selection decisions in Indonesia.

Keywords: Political Connection, Earning Management, Auditor Choice

Sources: http://repository.unair.ac.id/81497/